Back in September, we announced a custom incentivization mechanism for ANGLE rewards on Uniswap V3.

Today we are happy to reveal an augmented version, with the launch of Merkl by Angle Labs.

It will open this custom incentives mechanism to:

1. Any liquidity pools on concentrated AMMs

2. Any reward token

3. Any liquidity management wrapper (Gamma, Arrakis, …)

DAOs or individuals will be able to incentivize liquidity on any UniV3-type pool at a significantly more efficient way than with existing solutions.

Thanks to Merkl’s customization, incentivizors can spend less on incentives while attracting specifically the type of liquidity beneficial for their use case.

Everyone benefits

For incentivizors

As incentivizors of liquidity, Merkl flexible framework allows you to unlock the power of tailored rewards and to get the most out of the tokens you spend. No more wasted incentives on idle or inefficient liquidity.

The system is built to be fully customizable so you can influence liquidity on the pool you incentivize towards a specific distribution.

Example

Let’s say that you want to incentivize with ANGLE tokens holding agEUR in a agEUR-USDC liquidity pool. You could setup the distribution so that positions holding 60% agEUR / 40% USDC earn more ANGLE rewards. This would have the advantages of 1) putting more agEUR liquidity in the pool, and 2) letting some sophisticated LPs optimize for this and earn more ANGLE.

Merkl is also very easy to use: no need to deploy your staking contract, and all liquidity position managers (Gamma, Arrakis, …) you want can be integrated on the go.

You also don’t need to support the system on your front-end (even though our docs could help you for this), as all the rewards and incentives are displayed on Angle front.

For LPs

As liquidity providers, Merkl is built to allow you to increase the returns on your liquidity. Depending on how incentivizors setup their distribution formula, you now have the opportunity to optimize your earnings depending on the tradeoffs you are ready to take.

You can also enjoy being incentivized without having to stake your liquidity anywhere and while keeping a full custody of your funds. With Merkl, incentives are automatically made available to liquidity providers on pools, and to those who provide liquidity indirectly through wrappers (like Gamma or Arrakis).

The engine

Merkl works as an off-chain script that looks into all swaps made on a specific pool and computes a reward score for each LP address. Reward scores depend on the specific parameters set up by the incentivizors of the pools at the beginning of the distributions.

Once reward scores have been computed, they are pushed on-chain through a Merkle root in a contract on which anyone can claim their token rewards.

Though the script doing the rewards score computation is off-chain, the advantages Merkl brings to Uniswap V3 liquidity incentivization should largely outweigh the risk of doing this off-chain.

With the main risk being an error in the rewards distribution computation, everyone can dispute the rewards that are posted on-chain after they are made available through a Merkle root update. During this “dispute period”, anyone can detect a potential error in the reward computation and pause it. This makes the system optimistically trustless.

Next steps

The mechanism has been up and running for Angle since September 2022, and is live on Optimism as well! So far only Angle can post rewards and open distributions on it though. It will open to all Uniswap V3 pools on Ethereum, Polygon and Arbitrum soon!

In the meantime, you can find more information about the system in this documentation.

Contact us on Merkl’s channel of Angle Discord if you are incentivizing or looking to incentivize a Uniswap V3 pool!

Disclaimer

Merkl has been developed by Angle Labs’ team but will have no direct link to any of the Angle Protocol smart contracts.